Daily Sources 4/7

1. Gráinne Gilmore at the London Times reports that new forecasts from the IMF will suggest that bad debts held by banks and insurers are likely in the neighborhood of $4 trillion.

"The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia."

In the meantime, Nina Koeppen at Real Time Economics reports that the German business daily Handelsblatt quoted Jürgen Stark, a key member of the European Central Bank Executive Board, as saying that the decision to increase the resources of the IMF to lend to developing economies by $500 billion and to allow them an issue of $250 billion in special drawing rights amounts to "pure money creation." As an occasional reader remarked to me privately: the Germans probably are most worried by the specter of inflation under the Weimar Republic, where in 1923 consumer prices were doubling every two days.

2. Anna Shiryaevskaya and Robert Perkins at Platts report that Gazprom has reached a deal to purchase Eni's 20% stake in Gazprom Neft (an asset purchased in the April 2007 bankruptcy sale of Yukos) for an estimated $4.2 billion.

"Eni also signed several other cooperation agreements for projects in Russia and abroad with the main Russian energy companies, including electricity company Inter Rao UES, state oil producer Rosneft, oil pipeline operator Transneft and engineering company Stroytransgaz.

Eni plans to "start a wide program of strategic cooperation involving different activities in the energy field" with these companies."

In a statement, Eni said:

"These agreements will further foster ties between Italy and the Russian Federation and will significantly strengthen security of gas supplies to Italy and Europe."

3. Julia Kollewe at the Guardian UK reports that British industrial production fell by an annual rate of 12.5% in February. Output was down 1% from the month earlier, which may be somewhat encouraging given that February is about 10% shorter than January.

4. Manfred Ertel at Der Spiegel reports that with Greek government debt at 94% of GDP, facing disciplinary action by the EU for exceeding the euro zone budget deficit limit of 3% for the third time, and its financial sector hoarding cash after being burnt by financing in eastern Europe and the Balkans, the country is facing a brutal credit crunch which is beginning to bring sectors of the economy to a halt. Worth reading.

5. The Associated Press carried the full text of President Obama's speech in Ankara yesterday. It is long, and worth reading in full, but I thought the most important paragraphs were these:

Make no mistake, though: Iraq, Turkey and the United States face a common threat from terrorism. That includes the al-Qaida terrorists who have sought to drive Iraqis apart and destroy their country. That includes the PKK. There is no excuse for terror against any nation.

As president, and as a NATO ally, I pledge that you will have our support against the terrorist activities of the PKK or anyone else. These efforts will be strengthened by the continued work to build ties of cooperation between Turkey, the Iraqi government, and Iraq's Kurdish leaders, and by your continued efforts to promote education and opportunity and democracy for the Kurdish population here inside Turkey.

This preceded much of the talk of "engaging with the Muslim world," which, evidently, many Turks find offensive anyways, as in, who speaks of the Netherlands, for example, as a "moderate Christian nation." That said, Marc Lynch at Foreign Policy remarked that several Arab commentators were especially impressed that Obama chose to visit a Muslim nation before having visited Israel:

"Several Arab columnists noted with amazement that Obama visited a Muslim country before he visited Israel--which they are taking as a potentially politically costly, and therefore more credible, signal of the importance he places on reaching out to the Muslim world. And not just any Muslim country--as a number of Arab commentators note, Turkey is particularly popular right now because of Erdogan's outburst against Shimon Peres in Davos and his outspoken support for Gaza, along with Turkey's good relations with Syria, Hamas, and others across the great Arab political divide. If there is another speech to come, as I believe there is, it will be interesting to see how that choice balances the Turkey gambit."

That said, Turkey is an ally of Israel. Meantime, Der Spiegel reports on the annoyance mooted by various European politicians at Obama's support for Turkish membership in the EU.

"'It is a meddling in the internal affairs of Europe,' Bernd Posselt, a member of the European Parliament from Bavarian's conservative Christian Social Union (CSU), blustered in an interview with SPIEGEL ONLINE. 'The EU is not Obama's plaything. ... He should accept Turkey as America's 51st state instead,' he continued.

Markus Ferber, the CSU's lead candidate in European Parliament elections set for early June, echoed his party colleague. 'There is no question that the US has a voice in NATO. But when it comes to membership in its own club, the EU decides by itself,' he said. 'We don't need any tutoring from abroad.'

Party head Horst Seehofer said that Europe's 'internal harmony' is dependent on 'common cultural and spiritual roots.' He went on to say that 'Turkey, as self-proclaimed representative of the Muslim world, clearly doesn't fit in.'"

Sarkozy and Merkel also indicated opposition to the notion at this stage:

"Sarkozy was quick to reject Obama's support for Turkish EU membership. Speaking after the US president said in Prague on Sunday that membership for Turkey would 'ensure we continue to anchor Turkey firmly in Europe,' Sarkozy said: 'I have been working hand in hand with President Obama, but when it comes to the European Union it is up to member states … to decide.'

German Chancellor Angela Merkel, whose own conservative Christian Democratic Union is likewise skeptical of Turkish membership--preferring a 'privileged partnership' for the country--spoke of 'differing opinions' when it came to Turkey's EU ambitions."

Worth reading in full. Of course, it costs the US nothing to support Turkish membership in the EU, and it gives the Obama Administration capital in Ankara, much as German and French bashing of "American capitalism" costs them nothing, and gives them political capital at home.

6. Ernesto Londoño, Michael D. Shear and William Branigin at the Washington Post report that in his surprise visit to Iraq today, President Obama said it is time for the Iraqi's to "take responsibility for their country." The statement was greeted with "wild cheers" by the troops.

7. Reuters reports that Russia and China, in the UN Security Council, with the support of three other council members, have indicated that they oppose a resolution which would punish North Korea for its recent satellite launch. The Security Council held a three hour meeting to discuss the issue on Sunday, but agreed to no action outside of agreeing to take up the issue again soon.

"The five permanent members of the Security Council--the United States, Britain, France, China and Russia--plus Japan met at UN headquarters on Monday to explore a possible compromise, but Japan and the three Western powers failed to persuade Russia and China that strong condemnation was needed."

8. Jane Perlez at the New York Times reported yesterday that the recently reinstated Chief Justice of the Pakistani Supreme Court, Iftikhar Muhammad Chaudhry, has asserted the court's jurisdictional supremacy in Swat Province by hauling in the Attorney General and other officials before the court to be castigated for failing to put a stop to the public flogging of a woman by the Taliban.

"From the volley of exchanges between the judges and the officials, and an impassioned account by a prominent lawyer before the court of the terror in Swat, it became clear that the Taliban ran the area with impunity.

Chand was singled out for the punishment after she declined a Taliban fighter’s proposal for marriage, the head of the Peshawar Bar Association, Abdul Latif Afridi, said after the hearing.

After her refusal to marry, an electrician visited the family home, and, according to Mr. Afridi’s account, the scorned Taliban suitor saw her leave the house with the workman. She was flogged on March 7, accused of consorting with the electrician as an unmarried woman, the lawyer said.

Since the video was first shown on Pakistani television stations last Thursday, it has set off an emotional national debate."

The government struck a deal recently with the Taliban in Swat to allow for the imposition of sharia law, but with the proviso that the federal courts would remain the courts of appeal.

9. Patrick Harrington at Bloomberg reports that President Hugo Chávez's press office released a statement upon his leaving Japan for China today that he secured $33.5 billion in Japanese investments in Venezuela.

"Investments ... include $10 billion within five years in liquefied natural gas, $8 billion in petrochemicals, $1.5 billion in refining and $4 billion in a joint-project finance fund ... according to an e-mailed statement sent by his press office. Chávez didn’t specify where the remaining $10 billion would be invested ...."

Harrington also reports that "today said the first African-American US president was 'blacker' than former US Secretary of State Colin Powell." However, after a pretty long search of Venezuelan online (and Spanish-language) news, I could find no confirmation that this remark was made or any sense of the context. On the other hand, I did find a story that Chávez quite positively responded to Obama's decision to work on a new nuclear disarmament efforts with Moscow, saying that he would "extend a hand" to the US in the pursuit of peace in the upcoming Americas Summit in Trinidad and Tobago. Chávez also responded to the question of whether it was contradictory to enter into large oil financing agreements with Tokyo if Caracas wished to pursue an "alternative to the US" strategy, saying,

"La alianza que hemos comenzado a tejer Venezuela y Japón es el reflejo de un mundo de países independientes, de gobiernos libres para decidir su propia política exterior sin depender de ningún centro de poder mundial."

or, more or less

"The alliance initiated between Venezuela and Japan is a reflection of a multipolar world of independent nations, of governments free to decide upon an appropriate foreign policy without relying on a single center of global power."

Meanwhile, Rebecca Wilder at News N Economics reports that it is beginning to look as if the Bank of Japan has begun a policy of "quantitative easing:"



Worth reading.

10. Jacob Greber at Bloomberg reports that the Reserve Bank of Australia cut its benchmark rate by 0.25% today to 3%. The rate is the lowest seen in 49 years and is the latest in 4.25 percentage points worth of cuts since September of last year.

11. Upstream online reports that Baker Hughes reported that the global rig count fell by 440 nearly 16% in March from February to 2753 actively exploring or drilling for oil or gas. The US rig count fell by 215 or 19% to 1105 in March from February.

12. Justin Fox at the Curious Capitalist has another go at plotting the fall in employment in the current crisis against that of the Great Depression:



This is for non-farm payrolls, which represents a much larger share of the total population today than it did in 1929. That is, of a 121,767,000 total population in 1929, 10.5 million, or 8.6% were employed in "agriculture," of 305 million or so total population today, about 3.5 million are employed in "agriculture," or 1.2%.

13. Darrell A. Hughes at Real Time Economics reports that the quarterly survey of CEOs by the Business Roundtable was published today and showed that 67% expect their sales to fall. Nearly 75% expect to lay people off.

"The Washington-based Business Roundtable is an association of CEOs for 160 top US companies. The quarterly survey, completed between March 16 and March 27, aims to provide the executives’ outlook on sales, capital spending, employment and U.S. economic growth for the subsequent six months."